Zero
A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon.
A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon. Instead, the security is issued at a discount to its face value (also known as its par value), but is redeemed (bought back by the issuer) at face or par value.
The result is the holder should enjoy a capital gain over the life of the security. This type of instrument is often issued by split-capital investment trusts some of the shares issued are 'zeros' and the rest 'ordinary'.
Zeros are tax efficient gains are typically taxed at the capital-gains tax rate of 18% and so can be useful to an investor looking to pay a big future bill such as school fees. But there are risks. If, say, the issuer goes bust, the holder may get nothing back.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Zoopla: House prices slows to 1.4% in May as rate of sales at four year high
The average UK property now costs £268,400, Zoopla says, but some areas of the country are experiencing much higher price growth than others.
-
FCA reveals 'once in a generation' advice changes - what the reforms mean for you
Consumers to get free access to financial advice type help for pensions and investment following proposed changes from the regulator